Analysis

Time Warner Cable's split personality with TV sports

Time Warner Cable says one thing but does another when it comes to sports. (Dan Krauss / Los Angeles…)

Few cable companies have been as vocal about the rising costs of sports programming as Time Warner Cable.

"What was a minor problem is turning into an astronomical problem," Time Warner Cable chief executive Glenn Britt told the Wall Street Journal just over a year ago. "The ultimate solution is to get that programming on some sort of smaller packaging scheme."

But Britt's words don't match up with Time Warner Cable's actions. As of late, few cable companies have been as instrumental in driving up sports costs as Time Warner Cable.

The latest example of Time Warner Cable's split personality is its tentative agreement with the Dodgers. The cable operator, which has over 2 million subscribers in the region, is finalizing a TV contract worth $7 billion to $8 billion that will run between 20 and 25 years. The Dodgers will get their own channel that Time Warner Cable will help manage and distribute.

The Dodgers currently are on Prime Ticket, a cable channel owned by Fox Sports, a unit of News Corp. Fox Sports wanted to keep the Dodgers but its offer topped out at around $6 billion, people familiar with the matter said.

For Time Warner Cable, the accord comes less than two years after it outbid another Fox channel -- Fox Sports West -- for the Lakers. That contract was for $3.6 billion for 20 years with an option for another five years.

Executives at Time Warner Cable have said the company was getting into the sports game as a defensive move. In short, it wanted to cut out the middle-man -- often Fox Sports -- and deal directly with the teams for content.

That has meant outbidding incumbents, having to create new sports channels and charging other pay-TV distributors a premium to carry them. The bulk of those costs ultimately get passed on to consumers.

While Time Warner Cable has taken some franchises away from Fox Sports in Los Angeles, in San Diego the strategy backfired. Fox held onto the rights to the Padres despite a big bid from Time Warner Cable. The end result: Fox raised the price of its sports channel there to cover the costs of its new deal, and Time Warner Cable refuses to carry the network.

"They do seem to be talking out of both sides of their mouth," said sports industry consultant Marc Ganis. "Time Warner Cable has at one moment railed against excessive rights fees being paid and in the next moment pays an exorbitant rights fee and demands a massive subscription fee."

Ganis said Fox, which owns 21 regional sports networks and is launching a national service as well, has at least had a consistent strategy. Time Warner Cable, Ganis cracked, is "schizophrenic."

Britt has previously advocated that sports channels be sold separately from other programming so consumers who are not big fans don't get stuck with the bill. Ganis wonders if the Dodgers deal may lead to that.

"Is the Federal Communications Commission going to finally demand a la carte programming because Time Warner Cable persists in battling Fox?" he asked.

That is the greatest fear of the companies that own sports networks, because it would mean less subscription and advertising revenue. Wonder where Britt falls on the issue these days?